Creditworthiness of individuals and businesses has long been a quantifiable measure from which many personal and commercial transactions are based. Creditworthiness is fundamentally a measure of risk for ascertaining the likelihood that an entity can pay its debt obligations in a timely manner.
Personal credit scores provided by credit agencies such as Experian, Transunion, and Equifax quantify the creditworthiness of an individual into a numerical score. This numerical score ranges from 300-850, with a higher score representing greater creditworthiness or lower risk of defaulting on debt obligations and a lower score representing lesser creditworthiness or higher risk of defaulting on debt obligations.
Business credit scores, also referred to as Paydex scores, are provided by various credit agencies. Like the personal credit score, the business credit score is a risk assessment indicator and is quantified as a numerical score. As the name suggests, business credit scores are provided for business entities and not individual entities. As used hereafter, the term entity will interchangeably refer to a business or an individual (i.e., person).
An entity's credit score is primarily derived from that entity's payment history. The payment history can be ascertained from various lenders that engage in commercial transactions with the entity, as well as vendors that provide payment history as to how quick and frequent an entity makes payments to its vendors. However, the closed nature of the credit reporting process limits who the contributors are. The contributors mainly include banks, credit card companies, vendors who provide trade references, and mortgage companies, while excluding individuals, small businesses, and other merchants.
Credit scores and creditworthiness have become standardized metrics that parties to a transaction look to when deciding to transact or when agreeing to terms. However, entities are now looking to transcend beyond risk assessment and consider other factors that are key to deciding whether to transact with another. This is especially true for the ordinary consumer who usually does not consider the creditworthiness of a business before transacting with that business.
Instead, the consumer is more concerned with whether the business provides quality goods and services, is responsive, and is trustworthy as some examples. Similarly, a small business relies less on its credit rating than its customers' experiences in gauging the likelihood of its success. For instance, whether a customer leaves satisfied with a service or a product is instrumental in determining whether that customer will return in the future or will provide referrals to encourage others to visit the small business. A sufficient number of good client experiences beneficially increases the exposure of the small business, thereby resulting in better chances of growth, success, and profitability irrespective of the business' credit score. Conversely, a sufficient number of bad client experiences can doom a small business irrespective of the business' credit score. The Internet has also allowed entities to easily reach beyond their geographic region and transact with other entities that are distributed anywhere in the world without ever meeting those entities. In such cases, the entities to a transaction are as equally or less concerned with the other entity's creditworthiness than they are about the trustworthiness, reputation, quality, timeliness, cleanliness, character, value, and other such factors. These and other factors constitute entity credibility.
Accordingly, credibility is a multi-dimensional measure that transcends risk. Entities may define credibility differently based on the factors that are important to them or the information that is available to them. The multi-dimensional nature has made it difficult to quantify and is the reason why there is no standard measure for credibility.
There is currently no service from which an entity can accurately, comprehensively, and readily ascertain its credibility. Some entities conduct surveys. Others look to various media to piece together their credibility. These media include newspaper and magazine reviews, client reviews that are posted on Internet websites such as www.yelp.com and www.citysearch.com, and complaints that are logged by the Better Business Bureau as some examples. It is very time consuming, inaccurate, and difficult for an entity to piece together its credibility in this manner. Moreover, even if an entity pieces together its credibility, there is no reference point from which the entity can get a relative perspective as to how its credibility compares to its peers.
As such, there is a need for a standardized score that transcends basic risk assessment. There is a need for such a score to quantifiably measure entity credibility, wherein credibility is derived comprehensively according to various dimensions factoring into credibility. Accordingly, there is a need to access and obtain credibility relevant data from multiple sources with the ability to perform a relative analysis of that data in order to produce different component scores relating to different credibility dimensions from which the overall credibility score of an entity can be derived.